Having a credit card in your possession can be very important, as they are not inherently bad. That being said, not everyone knows how to manage their use of credit cards very well and they may require some help with credit card debt management, which is available in abundance.

There are things you should use your card for and things you should never use a credit card for and a big part of credit card debt management is common sense and restraint. Both of those qualities come in short supply with just about anyone so do not be surprised if some of the things that you see with credit card debt management advice seem a little difficult to you.

It is vital that you keep your debt, not necessarily within your means, but certainly not so far out of your means that they can’t even be seen. That would mean your debt has become uncontrollable. When common sense is applied to the process, credit can be used to let you live beyond your means in a reasonable way.

The most sound credit card debt management advice is to tell you to have a credit card and only use it when you absolutely need to and then pay off the balance every month. If that were at all popular then there would not be any credit card companies in business so obviously a lot of people need credit card debt management advice.

You need to keep track of you monthly statements. Most importantly, take note of the interest rate and credit limit on your account.

If, while checking your statement, you see that your interest rate has increased, find out why by calling the company and asking directly.

You can threaten to close your account and switch to another company if they are not able to provide you with a satisfactory explanation about your interest rate. Such firm action will usually get your interest rate lowered back to normal. Your credit limit will increase if you are able to make regular monthly payments but you consistently leave a balance on your account.

When you are issued a card, determine what your personal limit should be. You can ask them to lower it if they ever raise it higher than what you are comfortable with. Remember that, regardless of what their reasons for not wanting to do so are, this is your money and you can decide what to do with it.

The average family has no desire to file for bankruptcy. When credit card use becomes out of control due to poor financial management, bankruptcy can be an unwelcome reality of life. If you find yourself drowning in debt, seemingly without a way out, there are ways to rid yourself of debt. There are many ways to do so, even though some TV ads would like you to think that using a credit counseling agency is the only one.

Simple Ways to Relieve Credit Card Debt

The first basic steps to relieving yourself of debt incurred through credit card use are simple, easy, and you don’t need any kind of assistance to do them. For example, you need to establish a budget. Use it to keep tabs on exactly how much you spend on a monthly basis. Thus you will be able to see the difference between what you earn each month and what you spend. Some spending habits might not be compatible with your current financial circumstances. Even though buying a car doesn’t have to be done with cash, eating out constantly and charging every meal might an unessential activity that is causing you debt.

Set realistic budgets for yourself, and be flexible. If you notice that you have an abundance of cash or are still increasing your debt, be willing to change your budget to match your needs to relieve credit card debt. If you’re in need of a third party to help formulate a plan, seek out a credit counseling service to help you get a plan towards relieving credit card debt. They’ll help you along the process, helping you to set your own budgets and getting you a loan if necessary.

Credit Consolidation

However, there’s more that you can do to relieve credit card debt. To speed your journey along, start thinking about credit consolidation. Pay off one card (either the lowest balance or highest interest card) first so that you have more money to put towards the others, thereby cutting into the total interest that you’ll pay over time.

Taking out a loan is another way to pay off your debt quickly. Interest rates on home equity loans and mortgages are much lower than those your credit cards are being charged. For example, $60,000 in debt paid over ten years can change into $25,000 to be paid over four years with the help of a loan.

Debt doesn’t have to force you into bankruptcy. Using some of the simple suggestions found in this article can help you to get rid of your debt before it becomes that serious.

Being in debt, an already stressful condition to be in, can bring along with it a horde of other unpleasant side effects, like a phone ringing off the hook because of calls from collection agencies and a mailbox exploding with letters of credit card settlement notices. Even though these things can be miserable to experience, there is good news. These events mean that the creditor you are dealing with is showing that he is willing to accept less than the total amount of debt that you owe and is agreeable to allowing you to use a debt solution plan in order to get rid of your credit card debt.

Settle For A Single Part Payment

Some creditors will allow you to make a single part payment, but this must be done within a short amount of time. Creditors want to make as much as possible, so if they think that you may eventually not be able to pay them at all, it would be in their best interests to get as much as possible returned to them, even if it’s not the total that you owe. Fortunately, this could work well for you too.

Creditors typically opt for a single part payment only if your account has been delinquent for ninety days or more. If not, and your account has been active recently, they will not be open to this debt solution.

You should, though, understand as much as possible about credit card debt settlement to put yourself at an advantage before the process starts.

To begin with, remember that not all credit card debt solution plans make your entire balance go away. In some unique cases, the unpaid balance of your credit card debt may be sent to a separate collection agency to handle.

Also, keep in mind that unpaid debt whose amount is six hundred dollars or more is considered by the IRS to be income earned and is thus taxable. This amount appears on the 1099 tax form.

Lastly, be aware that even going with a credit card debt solution will affect your credit badly in some way. Credit reports that show an outstanding balance to be “charged off” are bad news for you. “Settled for a lesser amount,” however, is less damaging to your credit since you chose to do something about paying back what you owed.

One position that many people find themselves in is a growing mountain of credit card debt. This can happen for several reasons. They can ignore the bills when they come in the mail, hurting their credit score and making interest payments shoot up. They can also continue to make purchases, however small, that all add to the problem. The following suggestions will help you reduce credit card debt.

Start Paying - Stop Charging

One of the most important suggestions for reducing credit card debt is to not ignore those bills coming in. You absolutely must sit down and start paying them because they problem is only going to grow much worse if you continue to ignore them. However, the manner in which you go about paying them is also important.

For credit card debt reduction, we’re going to take a look at the debt on individual credit cards instead of your total debt. Doing so will help you prioritize payments, and once you pay one card off, you’ll have that extra money to start paying the other off as well.

If you have a wallet full of credit cards, move them onto just one or two that charge a low interest rate. Then, choose the card with that carries the lowest balance and concentrate your efforts on paying that one off. Baby steps are the name of the game when working to lower your credit card debt since taking on everything at once will not turn out well.

So once you pay one card off, you have extra money towards paying off the other. However, there is another strategy some people opt for to reduce credit card debt, and it involves paying more on the higher interest card. By reducing the interest payments on that card faster, you also get more money towards paying off the other card. Both strategies are more effective than trying to pay off both cards in the same time span.

Above all else, remember to stop adding to your debt. Pay in cash or use a debit card to make all purchases. Keep in mind, interest rates can turn a low priced item into a huge expense, raising the original price by two hundred percent.

In addition to the above mentioned tips, you can reduce your credit card debt by lowering charges. By applying these suggestions, your credit card debt will steadily drop until it is no longer a cause for concern.

A big business, credit card debt collection produces millions of dollars annually from delinquent credit card accounts. The time that these debt collectors call, however, is often the worst possible, since being in debt is nothing if not stressful.

Credit card debt collectors do not just make casual phone calls; they are working hard to get you to pay your money. Collection agencies have been known to call several times throughout the day, since each bill you owe might be handled by a different agency.

How to Deal with Creditors from Credit Card Debt Collection Agencies

There is a variety of ways to handle a credit card debt collection creditor when they call. This first thing to remember is to remain calm. Many people tend to be overly stressed and become angry at the caller. In some instances, as with an overly aggressive credit card debt collection creditor, this may be appropriate. However, the majority of the people you will receive calls from are just like you, attempting to do a job.

Always track calls from creditors. Tracking means writing down the identification number and name of the person who calls you. You should also note the account number and client for the debt they are seeking payment for and the name of the credit card debt collection agency from whom you are receiving the call.

The company that originally issued you the credit card is the same as the client for the credit card debt collection agency. Keep all this tracking information, including the day and time of all calls, in a file. This information can prove useful, since debt collection agencies should not call you more than twice a month.

If you begin to receive calls on a daily basis or even calls many times throughout the day, it would be appropriate to tell the debt collector on the line that such excessive calling warrants a charge of harassment, despite their right to call you in an effort to have you pay off debt you owe.

Many debt collectors who call speak with you in a calm, respectful manner and you should go ahead and explain to them just why you have not been able to pay of your debt. Sometimes explaining a little bit about your situation can get them to set up a payment plan in an effort to help you eliminate your debt. Even if this is not the case for you, remember to assure the debt collector that you will be doing everything you can to get your debt paid off soon.

Credit card debt can be negotiated with the credit card company that is owed the money, but the grand majority of people in debt are not aware of this useful fact. It can even be done on an individual basis, without the help of any third party. Keep in mind that you should get all the facts from a variety of sources regarding credit card debt negotiation.

Yes it is difficult for you to pay right now but the credit card company just wants their money so when you are negotiating credit card debt remember that you are trying to find a place to meet the credit card company halfway. One of the things that help you in negotiating credit card debt is to know what can be negotiated and what is not open for negotiation.

Entering the negotiation process with the goal of reducing the total amount that you spent and now owe them, called the principal, will destroy your credit rating. The interest that has been charged to your account and the interest rate that is applied to your balance however, can both be negotiated successfully with credit card companies. Paying your principal is the most important part of getting out of debt, so even if the credit card company is not thrilled about your attempt to negotiate interest, you will be taking care of the most important payment.

If you look at your credit card bill you will see that your interest rate is listed on there in a spot that is easy to find. If your rate is over 10% then you have something you can use for negotiating credit card debt. Many store cards and low limit credit cards have rates that are over 20% and they usually go up every year. These are arbitrary numbers set by the credit card company and you can use them when you are negotiating credit card debt.

Paying your principle is essential; doing that will keep you safe. Consider an example that proves this. Someone who calls their credit company and threatens to pay off their entire balance and cancel their account if interest rates are not lowered is usually going to get what they want, resulting in lower payments each month.

Not Your Friend in Any Way

Credit card companies only want to get paid. Don’t expect them to bend over backwards in an effort to help you. They don’t want customers to pay off their balance in full and their only focus is making money off of your debt. It may seem cold, but those are the facts.

If you find yourself in a position where you need to negotiate your debt with credit card companies, telling them that you will pay your balance in full is a great way to make things go your way. People who pay off their balance each and every month are not earning the credit card companies anything, and those people aren’t given high credit limits.

Although it’s not always good news, numbers can’t lie. Throughout the United States, Americans are racking up some very unpleasant statistics regarding credit card debt. This trend seems to have begun in the 1980’s, because it was during that decade that credit card use started to become more popular and eventually came to be a very normal way to make everyday purchases.

Additional Hard Sell Tactics

Another reason to be worried by the unflattering picture that such credit card debt statistics were showing is that the credit card companies began to do their best to find more innovative ways to sell credit cards to consumers and if you have checked your mail box, or watched TV or been otherwise bombarded by different marketing tools, you would realize the hard sell tactics that were used to get you to use credit cards.

As these advertisements began to affect consumers, cash became a less popular way to make purchases, and thus, at least partially, credit cards led to the rise of information age. When computers took hold in society, so did credit cards. It also led to the less than desirable rate of debt that statistics now present, since during the 1980’s people used cash and checks less than credit cards.

Once credit cards had made themselves such a normal part of life, debts incurred from credit cards also became normal. Statistics on levels of credit card debt from that time show that most Americans were getting themselves into nine thousand dollars worth of debt annually, most of which credit cards were directly responsible for.

Many consumers who found themselves deep in debt because of credit card use did so because of a misunderstanding of the process. They thought that the credit cards were connected to their own money that they already had.

However, the truth is that the money that you spend when using your credit card actually belongs to the credit card company, who are actually just lending you the money with the condition that you need to pay it back.

In addition to purchases made, interest also builds up in your credit card account, bringing debt to staggeringly high levels. The average interest rate on most credit cards is roughly fourteen percent, a rate that can quickly change a small credit card balance into overwhelming debt.

When it comes to credit card debt reduction services you can most definitely take your fate into your own hands and not need to invest in some service that will leave you much worse off anyways.

Keeping some important things in that will help you to take advantage of do it yourself credit card debt reduction successfully is essential. Remember, if you are unable to eliminate debt and prevent bankruptcy with your credit card debt reduction services, you will be equally unsuccessful attempting to do so with any debt management service.

Don’t Use Them Anymore

Credit card companies want to get paid. With that goal in mind, they are willing to raise your credit limit in exchange for you paying the minimum monthly payment they ask for. The problem is that if you are already way in debt, raising your credit limit is not going to help anything. Not using your credit cards, though, is definitely the most difficult step in using credit card debt reduction services.

Charging purchases to a credit card can be addicting, but you must stop doing it. If you have gotten to a point where the only way for you to go on is a steadily increasing credit limit, read on and find on what to do about it.

Increase the Amount of Inflowing Cash

There are lots of ways to do this. Get rid of your cable television. Start working overtime or get a second job. Reduce expenses any way you can. Whatever it takes, get your hands on some extra cash each month so that you can control your debt.

Credit card debt is like gaining weight, it is so easy to build it up and so difficult to get rid of the excess. You got yourself into the mess and the biggest step in your own credit card debt reduction service is to admit that you have created the mess and now you have to fix it. Losing a little sleep because of a second job or giving up HBO for a while is a sacrifice you are going to have to make.

Most people think of being frugal as living without enjoyment. Frugal people are seen as the scrooges of life the ones who count every penny and refuse to part with one even for some heat in winter. The truth is that frugal people live some of the most joyous lives of anyone. They have money, little or no debt, and lots of freedom to enjoy it all.

The truth is that frugal people are not stingy, they are wise. They have learned to spend their money in the best way possible. The years have taught them to be thrifty and to look for the best deal or bargain. Experience has shown them to be patient and wait for the sale or to purchase when the time is right. Most importantly, frugal people have learned to save as many pennies as they spend.

Living thrifty brings a plethora of benefits, the first being financial security. Instead of blowing money, they wait to go on vacation, buy things they want, and otherwise spend money wisely so that they always have savings to fall back on.

Spending less money means that a thrifty person doesn’t require the same income to sustain their habits that a less frugal person would. That leaves them freer to enjoy life. Their work schedule thus is less restrictive, possibly even allowing them to work from home in pseudo-retirement.

Buying with cash continues to be the best way to negotiate large purchases in your favor, a fact known very well by the frugal buyer. A thrifty lifestyle allows you to save up cash for those big purchases in life instead of just making a rash decision to spend large amounts of money. Making high cost purchases with cash in hand and a well thought out plan will let you dominate negotiations over price.

Living thrifty does not have to be difficult. It is easier, however, to become frugal with the help of family members. Talk to your family before you start making changes towards a thriftier lifestyle.

Eliminating credit card dependency is the first step in making yourself a more frugal person. Buy with cash instead. Don’t buy anything without first sleeping on it. A twenty-four hour purchase waiting period will help you make sure you aren’t buying something just out of emotion.

A frugal life can be a wonderful life. You have security, freedom, and an appreciation for all that you have.

So you had to file for bankruptcy. Unforeseen circumstances can cause this to be the only option. However, just because you were once bankrupt does not mean that your future is grim.

Deciding to file for bankruptcy is not easy. But many people have had to and are now able to care for their finances stably. You can dust yourself off and get back on your financial feet even after bankruptcy.

All damage done to your credit by the bankruptcy process can be healed. Chapter 7 bankruptcy eliminates all of your debts, and some of your assets. Afterwards, building up your credit again is dependent on you paying your bills in a timely fashion.

You must care for the assets that you have been able to retain responsibly. If you still have your home, work on proving your ability to pay for bills on time by making all of your payments to the local utility company when they are due.

After a few months, apply for a secured credit card. Secured cards require the cardholder to pay a deposit. This is the money that you will start with. Over time, you may qualify for an unsecured credit card.

Stick to one credit card and avoid making regular charges on it. Keeping the card for emergencies is a good idea. Having a credit card re-establishes your credit.

Learn to pay in cash. Force yourself to refrain from making purchases without having the cash you need to pay for them. Paying in cash will also help you strengthen your bank account. This also prevents future debt problems, since bankruptcy often comes as a result of spending without having the cash necessary to do so.

Plan to succeed. Since you have already experienced bankruptcy, you know you don’t want to go through the process again. Establishing a good savings plan that includes an emergency fund will help you prevent any future need to file for bankruptcy. Credit card payments shouldn’t present any kind of problem after having had all of your debt eradicated.

When you do get a credit card again, you can expect to be bombarded with offers from credit card companies. They will do there best to get your business, but you can resist them if you are determined to stay out of debt.

Learn to live within your means. This requires that you be prepared for the unexpected. Credit counseling classes or meetings with a financial advisor can be helpful, since they will provide you with great tips on how to maximize your savings and care for your expenses responsibly.

Financial advisors might also help you by forming a savings account that you can later use to invest. Since retirement often continues for upwards of twenty or thirty years, saving and investing wisely in essential. While you work at rebuilding your credit, keep your focus on saving for retirement.

Bankruptcy is not the end of the story. People can recover from it and develop a healthy financial picture. However, it takes time and patience.

Nothing can tighten your chest more than knowing the electric bill is past due and that the bank account is hitting rock bottom. Not having the finances to pay ordinary bills can be the stress that breaks a marriage’s back. Learning to live a frugal life not only helps with your finances today, but it can also prepare a secure life for tomorrow.

By making frugal living choices, you will have more opportunities in the future. It is important to train yourself to limit your expenses and save as much as possible. Such choices can enable you to start your own home business, or just live off savings by retiring earlier than normal.

Retirement is not simply the idea that you are leaving your current employment. It is choosing to have a life where you don’t make a regular paycheck. With frugal choices you will no longer need as much income to maintain a financial balance. You can finally say goodbye to your nine-to-five if you choose (although that lifestyle is not for everyone).

Making frugal choices will help you build up your savings. Having several months’ worth of income in the bank could finally give you the courage to start that business you have always dreamed of having.

Being in a position where you don’t have to rely on your income will make it easier for you to find success on the path that you desire. The stress to make money will be replaced by a simple desire to succeed.

Living frugally and saving all excess money at the end of the month will leave you with quite the savings in a short time. That could finance an unforgettable trip around the country or even the world. Or you could use it to live off while you go back to school to study something you’re passionate about. Whatever it is that you would love to do with your life, accumulating a large amount of savings by leaving thrifty can let you make it a reality.

Freedom is the final goal of a frugal lifestyle. Resisting the temptation to spend money at the moment will make your determination stronger. It could one day mean having money when you really want to so that you are able to spend it on something meaningful.

Making some slight adjustments to your budget can help you maximize your savings, thus keeping you ready to deal with emergency situations and well prepared for the future financially.

About the Author:

Get more easy-to-follow debt control methods on the Debt Smackdown website. Stop scraping by every month, never getting your debt paid off. Learn how you can get out from under your debt at No Comments »

Aug 14 2008

The Real Secret To Quickly Changing Your Attitude About Money

Posted by: William Blake in Finance, tags: Finance

by William Blake

A person’s spending habits are usually set by the attitude they have towards money. And in this world, there are people who save, there are people who spend, and everything in between. Changing your spending habits will also mean changing your overall attitude towards money.

Starting very early on in life, people begin to develop attitudes about money, mostly based off of what they observe their parents and other adults doing. Often times, a child’s attitude towards money and spending habits will be related to the amount of money that there family was accustomed to earning. Larger family incomes tend to produce children that spend money easily.

Whatever your environment, your money views were probably shaped by the people around you. Unhealthy views of money begin here. If money was a bone of contention in your home, you will likely make every effort to avoid confrontation when it comes to money. That could lead to overspending becoming a hush-hush topic in the home.

Children whose parents were always comfortable spending money freely will probably feel the same when they grow up. This can be true even if your free spending does not match your limited income, which is one cause of serious debt.

Many scenarios can be drawn from childhood exposure to money. Remember Ebenezer Scrooge? He grew up with no money and it consumed him. During his adult life he shunned all other pleasures for the love of money. No one wants to end up like that.

Wanting to is the first step in changing your attitude towards money. Although it will demand effort, sticking with your desire to change will give raise your chances of success.

You should also get in touch with a financial advisor. Discussing the positive and negative aspects of your financial situation will help them decide how to form a portfolio for you that will contain investment suggestions. If you tell them your financial goals, they will do their best to help you reach them.

Financial advisors also offer assistance in making a budget. An individual who has difficulty spending money on themselves because of obsessive saving can be aided to enjoy their money more. By following a budget, such a person will learn to lighten up about money.

A big spender will use a budget to curb spending. It is okay to spend, but make it special and not an everyday occurrence. Money doesn’t always flow freely unless we plan for it to do so. That requires a spender to realize that it is okay not to spend it all at once, but to save some for later.

What is your money attitude? Is it helping or hurting you? To improve your life, why not talk to a financial expert about healthy changes to your money attitude.

About the Author:

Learn more about credit card debt consolidation and other helpful methods to reduce credit card debt on the Debtopedia website. Get your free copy of my report “Secrets Of Credit Card Debt” at No Comments »

Aug 14 2008

Debit Cards - A Smart Choice?

Posted by: William Blake in Finance, tags: Finance

by William Blake

Connected to checking accounts, debit cards are used as if they were credit cards, bearing the logos of Visa or MasterCard. Debit cards, however, are not charged any type of fee since they only use the money available in the bank account they are attached to. Debit cards seem like a good choice, but considering the details will help you decide for sure.

A customer can choose whether or not they wish to receive a debit card at the time they open a checking account. There appearance is quite similar to that of credit cards and they are used in the same way, making purchases at restaurants and stores easy and quick. Plus, none of the charges associated with credit cards apply to debit cards. Bank commercials often glamorize the use of debit cards, as if using cash were the most terrible faux-pas in the financial world.

Debit cards teach people to manage money again when they have had trouble in the past with credit cards. They come complete with a safety net because they are tied to a checking account with a set amount of funds. Checks and cash are being pushed out of the way in favor of the “new plastic”.

The above mentioned functions of debit cards make them seem easy to use and safe, which they can be. Be warned, however, that there are risks associated with the misuse of debit cards.

In order to balance your checking account, all purchases made with a debit card should be recorded. ATM’s, a modern marvel of convenience, can be a huge source of problems for a debit card user since they offer instant cash.

Just as quickly as that money was deposited in your account it can disappear if you are not careful. The checking account can become overdrawn without ever bouncing a check. ATM receipts can be deceiving, because they don’t always reflect the true current balance in the account if other transactions haven’t cleared the bank.

Debit cards are also subject to “blocking” just like a credit card. This means that some merchants can block off a set amount of money in the account until your transaction with them is processed. Case in point: using a debit card to pay for a $20 visit to the gas station, but the store blocks off $50 on the card. If the extra $30 was earmarked for something else, you will run into problems until that block is removed.

If you are able to handle your money well and make responsible choices when it comes to spending, a debit card can be great tool. The misuse of these cards, however, can cause problems, including a checking account with a balance that dips down into the red.

About the Author:

Debt consolidation can help you pay off debt faster but it’s not the best choice for everyone. Find out more about when you should and shouldn’t consider consolidating your debt on the Inside Debt Consolidation website.

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Aug 14 2008

Comparing Credit Unions to Banks

Posted by: William Blake in Finance, tags: Finance

by William Blake

Credit unions certainly have fewer locations and are less common than banks. That doesn’t mean that they offer services of a lower quality, though. Consider the advantages offered by credit unions to understand what differences there are between them and traditional banks.

1. Who owns a credit union? A group of investors are the owners of a bank, and as such they are responsible for decisions regarding business policies and administration. These same choices affect the ability of the investors to make money from the investments they have made in the bank. Conversely, credit unions are owned by their members and the decision making board members are volunteers that give of their time on behalf of other members. Still, each member of the credit union can vote on the policy that is to be followed since it will affect their money.

2. Do they keep your money safe? Any money being stored in a bank is guaranteed to be there by the Federal Deposit Insurance Corporation (FDIC) and this guarantee is displayed at each and every bank. Credit Unions follow a similar process and are 100% secure, but the Credit Union National Association (CUNA) is the organization backing them up.

3. Who can join? Anyone who can meet the requirements of the banking institution can open an account there. Banks have a greater reserve of cash at their disposal so they offer incentives to get customers in the door. They call these “loss leaders”. If half of the people that come in open an account, then the bank can afford to take a loss on the items that they are giving away for free.

Credit unions are not open to the general public like a bank is. Credit unions choose members based on many factors: geography, workplace, religious affiliation, and civic associations. There is a credit union out there for everyone if you look long enough. The small selection of members allows them to offer better services to those members.

4. Are they friendly? Banks do what they can to attract new customers, but their real loyalty belongs to the investors in charge of the bank’s care. This is why their customer service often waxes at the time you open new account but wanes quickly.

Customers of credit unions are also making the business decisions for the company, so the customer service is traditionally better. To keep future interest rates on credit cards and loans low, money that exceeds the running costs of a credit union is used to maintain interest rates on money market accounts, savings accounts, and CD’s as high as possible.

Banks don’t like credit unions because they offer something that they don’t: consistent customer service and better interest rates. On the other hand, banks have incentives that credit unions can’t match because they don’t have as much money to use on them. The choice is up to each customer to decide what is most important to them in an institution.

About the Author:

If you’re wondering whether debt consolidation is the best solution to your debt issues, visit the Debt Smackdown website for more helpful tips and advice at No Comments »

Aug 13 2008

Little Known Secrets About Your Credit Score

Posted by: William Blake in Finance, tags: Finance

by William Blake

Your credit score gets checked whenever you try to apply for a credit card, apply for a loan, or make any kind of credited purchase. Your credit score is basically a number that represents how trustworthy the business world believes you to be as far as making your payments is concerned, a higher number indicating more confidence in your ability to pay. Your credit score is derived from information found in a credit report.

Your credit report is all of your financial history for the last seven years. The exceptions to the seven year rule includes some good credit information (like closing an account that was in good standing) and Chapter 7 bankruptcy information - both of which stay on your history for ten years.

Your three digit credit score is calculated based on a formula developed by credit report companies. They go over information connected to your credit history to determine your score. California established a law in 2000 that allows anyone applying for credit to have access to their credit score. Now federal law permits you access to information that the credit card companies used to keep secret, like how your credit score is determined.

The breakdown of your credit score is fairly easy. The number ranges from 300 to 900 with approximately 35% of that number being based on payment history, 30% on outstanding debt, 15% on the length of time you have had credit (the longer the better), 10% on the number of inquires on your report, and 10% on the types of credit that you currently have. The companies then compare this to credit performances of other consumers with similar histories and profiles to reach your magic credit score.

Some tips to help your credit score:

- Maintain your credit rotating at about 25% of your total credit limit.

- Don’t be late paying. Making payments earlier than necessary does not incur any penalty.

- Shop for loans (mortgages, car loans, and other loans of that nature) during a specific period of time - like a 30 day period. These will show up as one inquiry if done in this way.

- Know your credit score. Each year, you can check your credit score for free by visiting annualcreditreport.com. Doing so will help you prevent problems from escalating until they create large problems.

About the Author:

Does your credit card company use two cycle billing? If you aren’t sure, you could be losing even more money than you think if you aren’t paying off your credit card every month. Find out what two cycle billing is and why it’s such a bad thing on the Debt Smackdown website.

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